Germany’s economic model under Chancellor Angela Merkel combined industrial scale, robust exports, strong vocational training, and stable public finances. Reforms initiated under her predecessor Gerhard Schröder such as labour market liberalisation improved competitiveness but masked underlying structural issues. Under favourable external conditions—strong demand from China, cheap Russian gas—these issues remained manageable. As those conditions shift, they are becoming acute risks. Germany has been widely considered an exemplar of export-led growth and industrial competitiveness. However, recent shocks—declining external demand (notably from China), rising energy costs, demographic ageing, and lagging innovation exposed deep structural vulnerabilities. This paper analyses sources of economic and political fragility such as energy dependence, export overreliance, innovation stagnation, foreign policy naivety and the emergence of the Alternative for Germany (AfD) party and evaluates Angela Merkel’s policy responses. It concludes that incremental reforms will be insufficient; Germany needs systemic adaptation to maintain its economic status. Yet current dynamics raise fundamental questions about Germany’s capacity such adaptation. A society long accustomed to prosperity and stability exhibits ambivalence toward strategic reorientation. The rise of populist forces such as the AfD illustrates a backlash against economic disruption and geopolitical uncertainty, while European and transatlantic partners increasingly criticise Berlin’s lack of leadership. Germany’s slow awakening suggests a nation struggling to reconcile its domestic constraints with the demands of a rapidly changing international order. Whether this adaptation occurs through deeper European integration, industrial transformation, or recalibration of foreign policy remains an open question—but the cost of delay is rising.